Asiabrn: Losing the crowd?

Background

Asia Brands Bhd ("Asiabrn") is involved in the production, trading, marketing, and retailing of lingerie, ladies’ leisure wear, children’s wear, and care and related products in Malaysia. Formerly known as Hing Yiap Group Bhd, Asiabrn took over the entire equity interest in Asia Brands Corporation Berhad’s subsidiaries, including Anakku Sdn Bhd, Audrey Sdn Bhd and Mickey Junior Sdn Bhd for a total purchase consideration of RM245,000,000. The exercise was completed in December 2012. For more, go here.

Recent Financial Performance

Asiabrn was doing fairly well for 18 months, from June 2013 to September 2014. In the past 3 quarters, the company was in the red. What's most alarming is that the sales has begun to drop sharply in the last quarter.


Table: Asiabrn's last 12 quarterly results


Chart 1: Asiabrn's last 12 quarterly results

Financial Position

As at 30//6/2015, Asiabrn's financial position looks satisfactory at first glance, with current ratio at 2.4 times while gearing ratio stood at 1.1 times. However, its inventory holding period has ballooned to 276 days from 183 days previously. In the world of fast moving consumer goods, this is just unacceptable because there is serious concern about product obsolescence. If Asiabrn provides for 25% for inventory write-off, this could amount to RM43 million. Asiabrn's inventory stood at RM174.2 million as at 30/6/2015.

Valuation

Asiabrn (closed at RM1.62 yesterday) is now trading at PBR of 0.55 time (based on NTA of RM2.92 per share as at 30/6/2015). With a cumulative loss of RM14.7 million in the past 4 quarters, we are unable to compute its PER.

Technical Outlook 

Asiabrn broke below its uptrend line, SS at RM3.00 in December last year. It is now holding onto its horizontal support at RM1.60. If this fails, then the stock may go to the psychological RM1.00 mark.


Chart 2: Asiabrn's monthly chart as at Aug 18, 2015 (Source: ShareInvestor.cm)

Conclusion

Based on poor financial performance, high inventory holding & negative technical outlook, Asiabrn is a stock to be AVOIDED.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Asiabrn.